Economic analysts and Bureau De Change (BDC) operators say the naira could record stronger gains and improved stability in 2026, supported by rising foreign exchange (FX) inflows.
They also see sustained monetary tightening, and ongoing structural reforms in Nigeria’s economy as factors that will drive the Nigerian currency this year.
The market operators, economists, and policy analysts spoke with Nairametrics on recent developments in the foreign exchange market and the outlook for 2026.
They note that improving confidence in the FX market, stronger external reserves, and reduced speculative pressures are gradually reshaping demand and supply dynamics, setting the stage for a more stable exchange rate environment in 2026.
What they are saying
Market experts identify the restoration of confidence in Nigeria’s FX market as a major factor underpinning the naira’s outlook.
Reforms introduced by the Central Bank of Nigeria (CBN)—including the unification of exchange rate windows, improved transparency in FX allocation, and tighter oversight of market operators—have helped reduce arbitrage opportunities that previously weakened the currency.
BDC operators say these changes have narrowed the gap between official and parallel market rates, significantly dampening speculative dollar demand.
According to Mustafa Abdullahi, a BDC operator in Abuja, the incentive to hoard foreign currency has declined as liquidity improves and confidence returns.
“The dynamics of the market are changing. As confidence improves and liquidity increases, more people are willing to sell dollars rather than hold on to them,” he said.
- Analysts also expect FX inflows to strengthen in 2026, driven largely by higher crude oil output, improved security around oil infrastructure, and stricter enforcement against oil theft. These developments are projected to boost export earnings and support Nigeria’s external position.
- Beyond oil, remittances from Nigerians in the diaspora are expected to remain strong, aided by more market-reflective exchange rates that encourage formal inflows. Analysts say growing non-oil FX inflows are increasingly playing a stabilising role in the market.
- From the fiscal and monetary side, experts highlight the importance of continued discipline.
The CBN’s firm stance on inflation control, coupled with efforts to curb deficit financing and improve revenue mobilisation, is seen as critical to preserving the naira’s purchasing power and strengthening investor confidence.
Risk still remains
Despite the positive outlook, some analysts caution that risks remain—particularly around pre-election spending. As political activities gather momentum ahead of future elections, concerns have emerged that unchecked fiscal expansion could exert renewed pressure on the currency.
Baba Ahmed, an Abuja-based economist, warned that election-related spending could become a risk factor if not properly managed.
“Most politicians will begin active campaigns this year. If spending is not well controlled, it could become a serious risk factor for the naira,” he said.
- FX market operators, however, note that easing import-related pressure could help offset some risks. The gradual expansion of local production in agriculture, refining, and manufacturing is expected to reduce import dependence and, by extension, demand for foreign exchange.
- Economists believe that renewed interest from foreign portfolio investors and longer-term foreign direct investment (FDI) could further stabilise the naira if current reforms are sustained.
- Clearer policy direction, predictable regulation, and improved FX repatriation processes are viewed as essential to attracting foreign capital back into Nigerian assets.
Speaking to Nairametrics, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), described the 2026 exchange rate outlook as largely positive, citing Nigeria’s strong external reserves as a key anchor.
“The prospects for the stability of the naira are quite bright. This is largely because our foreign reserves are very strong, and reserves play a critical role in determining the strength and stability of any currency,” Yusuf said.
Dr. Yusuf noted that sustained FX market reforms have reduced the likelihood of major exchange rate shocks, even during periods of stress in the oil sector.
According to him, rising non-oil inflows reflect growing confidence in the economy and policy framework.
He added that unless Nigeria experiences a sharp collapse in oil prices, a significant drop in output, or a reversal of existing reforms, major naira instability remains unlikely.
He projected that the exchange rate could remain largely within the N1,400–N1,500 per dollar range for much of 2026.
The CPPE CEO also commended the CBN’s liquidity management, noting that the reduced reliance on Ways and Means financing has helped limit monetary distortions.
“The CBN is also managing liquidity very well. We are not seeing the risk of the Ways and Means coming up and distorting the liquidity situation,” Dr. Yusuf said.
What you should know
Nigeria’s exchange rate has faced significant volatility in recent years following FX market reforms and naira devaluation.
In its 2026 macroeconomic outlook, CardinalStone projected that naira could strengthen to between N1,350 and N1,450 per dollar in 2026.
Nairametrics reports that the naira weakened slightly to N1,431 per dollar at the official foreign exchange market on the first trading day of 2026.
